Supporting Endurance’s proposal “would incur costs without allowing shareholders any additional leverage not already available to them,” ISS M&A Edge said today in a report.

The recommendation is a boost for Aspen Chairman Glyn Jones, who has been seeking to fend off a stock-and-cash bid that was valued at about $3.2 billion based on Endurance’s share price on June 2, when it made its second offer. Endurance said that day it was asking Aspen shareholders to approve a special meeting and increase the size of the company’s board to 19 from 12 to ease a takeover.

ISS said Aspen investors could tender their shares if they favor a deal, and avoid the cost of a shareholder meeting. The advisory firm said its opinion was related to the proposed board expansion, and not the merits of the buyout offer.

Aspen has said Endurance is offering too little and that combining the Bermuda-based insurers would alienate clients seeking to spread their risk. Endurance’s business protecting against agricultural losses isn’t a good fit for Aspen, which counts on sales in the Lloyd’s of London market, Jones’s company has said.

“Endurance’s stock is an unattractive currency given Endurance’s over-reliance on the volatile, low-margin and challenged crop insurance business and a dependency on reserve releases to fuel earnings,” Aspen said in a July 1 letter to shareholders. “Loss of business resulting from a combination with Endurance would cause significant financial harm.”

‘Highly Complementary’
John Charman, the chairman and chief executive officer of Endurance, offered as much as $49.50 a share for Aspen, though the price could be less for investors who opt for stock. That compares with a closing price of $39.37 on April 11 before Endurance announced its initial offer.

“The combination of Endurance and Aspen will bring together two highly complementary specialty insurance and reinsurance companies to create an even stronger, more profitable company with increased scale and an attractive diversified platform across products and geographies,” the suitor said on its website. Ruth Pachman, a spokeswoman for Endurance at Kekst & Co., declined to comment.

Institutional investors, including pension and mutual funds, are the traditional clients of proxy advisers.

Endurance’s bankers on the offer have been Morgan Stanley and Jefferies Group LLC. Skadden, Arps, Slate, Meagher & Flom LLP and ASW Law Ltd. provided legal advice. Aspen has said that its advisers included Goldman Sachs Group Inc.; Wachtell, Lipton, Rosen & Katz; and Willkie Farr & Gallagher LLP.